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The Years Of Escalation Are Well Over

A report from This Garden Island on Hawaii. “The real estate market on Kauai remained relatively strong through the first half of 2019, but overall sales figures across the island are down from this time last year, and the market could be in for a substantial downturn, Realtors said.”

“‘We are at the top of the market,’ said Broker CJ Halladay .’Right now it’s still a sellers’ market, but we should eventually see a transition.'”

“According to statistics compiled by Hawaii Information Service, the median sale price of single-family homes in Kapaa and Lihue is down slightly for the first half of the year, compared to the same period in 2018. But the change is almost negligible, especially considering the more-severe drops elsewhere on the island. According to Halladay, the lower prices are attracting competition.”

“‘Anything under $600,000 is moving really quick,’ he said, while homes listed in the $600,000-to-$900,000 range are ‘sitting on the market a little longer,’ and anything between $900,000 and $1.5 million has been ‘kinda hard to sell.'”

“Median prices islandwide are down over 12% so far this year compared to 2018, from $732,000 to about $643,000. The North Shore and Koloa single-family home markets have been hit the hardest so far, with homes selling for about 17 % to 18% less than what they did a year before.”

“‘Single-family homes have taken the hardest hit,’ said John Friedman, principal broker of Kauai Aloha Real Estate , discussing a downward trend in property sales volume that has affected real estate markets ‘pretty much across the board.'”

From Mansion Global on New York. “We caught up with George Filopoulos, owner and president of Metrovest Equities to discuss the ups and downs of the Manhattan market. MG: What’s the biggest surprise in the luxury real estate market right now? GF: I’m surprised at the lack of absorption in areas of Manhattan. New constructions are going through their fourth year of a slow pace.”

“MG: What area currently has the best resale value? GF: Hamptons oceanfront. In Manhattan, there’s a lot of interest downtown. We’re seeing better absorption south of 14th street as opposed to north of 59th street. But there’s a lot of new construction all over, and when they’ve been on the market for a long time, it creates shadow inventory.”

The Real Deal on Florida. “Just a few years ago, Palm Beach’s high society packed the sprawling waterfront estate at 101 Casa Bendita to attend galas and charity events hosted by the town’s hotshot developer Robert Matthews. But the mansion has remained empty since Matthews was convicted in a federal court of defrauding foreign EB-5 investors in a failed Palm Beach condo-hotel project known as the Palm House Hotel. And on Friday, Matthews and his wife’s former estate sold for $30.2 million to Vahan and Danielle Gureghian, a couple who run a charter school business.”

“The deal came about after a court-ordered auction to sell the property in March fell through. Bidders were required to make bids of at least $31 million to qualify, but no bid reached that level. The home was then taken over by its mortgage lender DB Private Wealth Mortgage in April. In total, the mortgage company claims it was owed about $31 million from Matthews and his wife Maria. The mortgage company first tried to foreclose on the house in 2017, but Matthews’ lawyers were able to postpone that foreclosure auction.”

“The 12,077-square-foot mansion was used by Matthews as a way to show that he was a successful businessman and entrepreneur, according to civil complaint by EB-5 investors in Palm Beach County. Matthews pleaded guilty in April in federal court to money laundering and tax evasion charges for defrauding foreign EB-5 investors in the Palm Beach condo-hotel project. EB-5 is a federal program where investors can get a green card in exchange for investing at least $500,000 in a U.S. enterprise and creating at least 10 jobs. The development group was able to solicit more than $45 million of EB-5 money for the Palm House development.”

“The development group assured investors that the project would be completed in less than a year and that their money would be protected in an escrow account with a bank. It also claimed that Donald Trump, Bill Clinton and Celine Dion would be on the condo-hotel’s advisory board. In reality, no such advisory board existed and much of the money was instead diverted for the personal use of the Matthewses, according to federal prosecutors.”

From Bisnow on California. “The San Francisco Bay Area experienced construction cost growth of 6.7% in 2018, making it the most expensive place to build in the world, according to an April report from Turner & Townsend. But the metro might finally be seeing sweet relief, Truebeck Construction Chief Operating Officer Nick Pera said at Bisnow’s Silicon Valley Construction & Development Summit Thursday. ‘[Construction costs] are starting to level off,’ Pera said. ‘We have subcontractors and trade partners, and other general contractors, that are actually looking for work.'”

“The company created its own construction cost index several years ago after finding existing indices didn’t accurately reflect the realities of the Bay Area, according to Pera, who is confident the kind of cost growth seen last year is over. ‘I believe the years of 5%, 6% or 7% escalation are well over,’ he said.”

The Dallas Business Journal in Texas. “Despite low mortgage rates, high levels of student loan debt are preventing potential buyers from purchasing a home, which is throttling the housing market in Dallas-Fort Worth and nationwide, according to mortgage industry and other real estate experts.”

“‘From a practical perspective, somebody coming out of school with heavy student loan debt may simply not qualify for a conventional loan,’ said Rick Sharga, CEO of CJ Patrick Co., a California-based real estate and financial services consulting firm. ‘Not only were they coming out with record levels of student loan debt, but they were coming out into a market with no jobs. The notion of them being able to pay back that student loan debt in any reasonable period of time was pretty much a fantasy.'”

“Many millennials stopped paying their student loans altogether, said Ilyce Glink, who writes a nationally syndicated column and moderated the panel at the National Association of Real Estate Editors conference. ‘First they were delinquent, and then they just stopped,’ Glink said. ‘Then you’ve got a huge chunk — and I mean tens of millions of people — who now have lower credit scores, which of course are the defining factor for all things mortgages.'”

The Wall Street Journal. ” While Hispanics comprise only 18% of the U.S. population, the group accounted for nearly 63% of new U.S. homeowner gains over the past decade, according to the National Association of Hispanic Real Estate Professionals. Jason Madiedo, chief executive of Las Vegas-based Alterra Home Loans, said 80% of his company’s loans are to Hispanic buyers and 70% are to first-time buyers who are fearful that if they don’t buy a home now they won’t ever be able to afford one.”

“‘The FOMO—the fear of missing out—has sort of set in,’ he said.”

“Lenders are also targeting Hispanics. Eva Angelina Romero, a real-estate agent in Nashville, said that more small lenders are offering programs geared to Hispanic buyers. One uses a tax identification number instead of a social security number, which a buyer wouldn’t have if undocumented. She said that while most of her clients used to be non-Hispanic, now 80% are Latino.”

“‘Mortgage companies are looking at that segment even more so now than before because refinances are not as plentiful [and saying] this is an opportunity we can no longer wait on,’ Mr. Madiedo said.”

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  1. ‘Lenders are also targeting Hispanics. Eva Angelina Romero, a real-estate agent in Nashville, said that more small lenders are offering programs geared to Hispanic buyers. One uses a tax identification number instead of a social security number, which a buyer wouldn’t have if undocumented. She said that while most of her clients used to be non-Hispanic, now 80% are Latino’

    Subprime loans show up when they are out of buyers.

    1. So what is the consistent, reliable source of income for these buyers? You know, one that will be there as long as the loan terms that were signed for.

          1. So do I.

            As long as a consistent supply of ignorant pukes are continously churned out by our stupid educational system that some suffer from and others greatly benifit from I will greatly enjoy receiving a consistent source of income. Easy income at that.

        2. Nobody has a consistent source of income in this country anymore ??

          Government employees do….Just finished a conversation with my son about a firefighter he knows…Works in Silicon Valley…Lives in Austin Texas…48 hours on…4 days off…Also does shift swaps…Work 8 days straight…Go home for two weeks with your paycheck…No money spent in the community that you earned it…No local community involvement..Church, youth sports etc…Thats all done in Austin Texas…

          1. I think allot of people commute to San Jose, maybe not quite that far though ? I know one in Tahoe. . huawei going to be laying off there maybe ?

      2. Yes the targeting of illegals is a sure sign of a top. I guess the silver lining is they will sell deport when the banks come looking or their money.

          1. Trump never mentions all the employers who cheat and hire illegals. 8 million illegals work in the USA. Fine them $3000 a day if ya hire and illegal or rent to them and they stop coming here. Pay whistle blowers to turn em in.

        2. Saw the targeting of Hispanics the last go round. One guy went in with multiple members of his social circle to buy a house. He didn’t live in the house. I think he intended to make money off it because he knew other people that were doing it. It all ended with the whole group losing that house. He was very bitter.

        3. Yep.

          Ken Cuccinelli, acting director of US Citizenship and Immigration Services, told CNN Monday that he didn’t know how many people had been arrested because the acting director of ICE hadn’t told him.

          Asked why he didn’t have details, Cuccinelli said, “presumably because operational details are kept contained within the agency executing the operation, as they should be.”

          On Sunday Cuccinelli characterized the raids as normal ICE business and pointed to statistics showing ICE has deported fewer people under President Donald Trump than it did under President Barack Obama.

    2. I wonder how many of these sales are to Hispanic middleman companies who buy the houses to rent out to clans of immigrants.

      And what sort of wage do these buyers bring home to afford a home in bubbly DFW? I imagine it’s the kind of job that Americans would do.

      1. That was about where I was going with my question. There would have to be some sort of in-between for what are essentially transients.

        2. Back when Mel Watt was in charge of FHFA (the money folks behind FHA), he proposed a mortgage where a homebuyer could count the income from unrelated residents in the income used to underwrite a mortgage. Ben talked about it a lot here on HBB. The proposal placed a limit that only 5% of the income could come from unrelated residents, but that’s hard to verify. Of course, this mortgage was a vehicle for illegals (or citizens or what-have-you) to get together with their homies to buy a house for themselves.

          I don’t know if that mortgage ever got off the ground. But there’s plenty of companies now with enough money to buy the houses as rent them out. I wonder how many of those Ramsey followers and FIRE Millenials are buying investment houses and turning them over the property management companies, only to find their property being trashed by migrants or unsavory characters.

          1. I wonder how many of those Ramsey followers and FIRE Millenials are buying investment houses and turning them over the property management companies, only to find their property being trashed by migrants or unsavory characters.

            This is definitely happening in the apartment world in SLC. Lots of crammed apartments. But it’s also happening with non-immigrant population in So Utah. I am increasingly seeing non-related families rent a single-family house in order to make the rent. Mostly white folks whose wages haven’t kept up with the cost of living (mostly housing).

        3. Didn’t we predict this here on HBB? Somebody — anybody from Blackstone on down to SallyFIRE — will buy up all the SFH and Joe Six-Pack will rent for life. HBB can ridicule me, but I’m glad I bought when I did.

          2. ‘will buy up all the SFH’

            Yet there are thousands and thousands of shacks, new and old, piling up on markets all across the US. Month after month.

        4. The apartment world around here has a nifty solution for crammed apartments: charge through the nose for parking. First parking pass is free, after that they can charge ~$100 per pass. When those 3 families find out that they would have to pony up an extra $400/month for parking, they move on. And generally they move on to rent an SFH where they can pave over 1/2 the front yard and park up and down the street.

          1. At our complex parking is expensive, but that is because we offer garage, climate-controlled parking. But we also are right by light rail station, so plenty of our residents can live car-free by using transit.

  2. ‘First they were delinquent, and then they just stopped…Then you’ve got a huge chunk — and I mean tens of millions of people — who now have lower credit scores, which of course are the defining factor for all things mortgages’

    But, pent up demand?

    1. “…who now have lower credit scores, which of course are the defining factor for all things mortgages’…”

      “…all things mortgages…” What a nauseating sentence. At any rate, a pesky little thing such as a low credit score never stopped anybody from getting a mortgage. This writer doesn’t know chit about mortgages.

    2. Then you’ve got a huge chunk — and I mean tens of millions of people — who now have lower credit scores, which of course are the defining factor for all things mortgages’

      Credit scores are rayciss. Such vestiges of white privilege and financial oppression must be abolished forthwith. Forward!

    3. Sounded to me like they were saying it was time to start ignoring low credit scores and let people buy houses who would be delinquent on student loans forever. If you can get them to pay you forever and stiff Uncle Sam why not? Everybody is trying to figure out how to pull the biggest chunk of meat off that lifetime earnings bone…the student loan guys thought they had it figured out but maybe not. We’ve got another hyena coming in hot from the other side.

  3. ‘The development group was able to solicit more than $45 million of EB-5 money for the Palm House development’

    Another day, another multi-million $ fraud thing goes belly up.

    1. The entire bubble is, once again, built on fraud. House prices cannot become completely detached from incomes without it.

      1. “The entire bubble is, once again, built on fraud.”

        It’s not built on fraud, it’s built on ignorance.

        Fraud involves some sort of deceit; This deceit is not there but instead the ignorance is there, there for anyone to see if they cared to look.

        For example: An ignorant person would not care about the meaning of the term “adjustable rate mortgage” at the moment he signed some loan documents but would scream “fraud” as it later on dawn’s on him that his stupid ass has ended up in a sling.

        1. Fiduciary responsibility not applicable to mortgage lenders, bankers, real estate agents or drug dealers

        2. “It’s not built on fraud, it’s built on ignorance.

          Fraud involves some sort of deceit; This deceit is not there but instead the ignorance is there, there for anyone to see if they cared to look.”

          Bullsh!t. They are doctoring up loan paperwork this time just the same as last time, so it gets through underwriting. There is no other way for prices to become so detached from incomes.

  4. ‘The real estate market on Kauai remained relatively strong through the first half of 2019’

    So far so good!

    ‘but overall sales figures across the island are down from this time last year, and the market could be in for a substantial downturn, Realtors said’

    ‘Median prices islandwide are down over 12% so far this year compared to 2018, from $732,000 to about $643,000. The North Shore and Koloa single-family home markets have been hit the hardest so far, with homes selling for about 17 % to 18% less than what they did a year before’

    Once again, the supposedly most desirable shacks in an area fall first, fastest and furthest. It’s a sign of a bubble popping.

    1. Gee, only an $89,000 loss in a year for the median house. $89,000/12 = $7,416. Do you think the median house rents for that? I sure don’t. That’s YEARS worth of rent.

  5. Prices are too darn high (again). Price is set at the margin. Speculators are dropping out (if they know what’s good for them) and shelter-buyers are priced out (buyer-fatigue). In order to keep the gravy train going for the gov’t. and REIC, the only thing left is scraping the bottom of the barrel (I.e. subprime). Just like last time. Rise and repeat. Of course it’s going to end differently this time.

      1. “Rinse and repeat.”

        Rise and repeat also works.

        The ignorant pukes who are beated down at the end of one cycle rise up again at the end of the following cycle so as to be beated down a second time.

        1. ” …rise up again at the end of the following cycle …”

          $orry, won’t happen this time.

    3. Of course we won’t hear about lenders “preying” on minorities until this fear of missing out thing blows up in their faces.

      1. They are preying on them, they are ‘helping’ them achieve the American Dream!

        “Welcome to America – here’s your debt”

  7. After subprime is exhausted, few buyers at current prices. This is already happening as inventory building and prices declining. We’ll be hearing the word “unexpectedly” more going forward, IMHO.

  9. This money-generating miracle that is vastly benificial to lenders could only be carried out if applied to great hoards of totally dumbed-down ignorant pukes.

    1. “This money-generating miracle that is va$tly benificial to lender$ …”

      dotted________line $igning fool$ a$ide, … where did all those “lender$” find all them golden monie$ goo$e egg$?

  10. Fraud in real estate be it mortgage fraud, EB5, other types etc are clear indications of late phase bubble. Per Buffet: ” you see who has been swimming naked when the tide goes out”.

    Tide appears to be receding.

    1. Fake markets everywhere.

      It’s exposed that a lot of Dem Congress people owe student debt.

      Law and order breaking down by resistance again ICE. Over a million planning to storm area 51 that’s a restricted military base. Ilegals storming borders with total disregard for USA laws. People attacking people they don’t agree with. Schools being Commie camps.. President hopefuls promising give a ways and take overs of private industry (health care). Government backing bad loans in the name of equality.

      The moral hazard of the bail out of the banking fraud of bubble of 2008 is now showing what a moral hazard that was.

    1. What a complete crock of $hit Zildow is. Their “Zillow Home Price Index” is supposedly “to the moon alice” for Raleigh. But look at the average list price and sale prices, down and barely up YoY, respectively. Raleigh is a great place, and in my opinion, one of the next up and coming great cities, but, they’re massively overbuilding there, and the job/wage growth there is still lagging too far behind to justify the current prices.

  13. No money spent in the community that you earned it…No local community involvement..Church, youth sports etc…Thats all done in Austin Texas…

    A lot of nurses do this thing too. Fly in to CA, work 6 12s, have 2 weeks off. Make 2x what they would in UT.

  15. “The deal came about after a court-ordered auction to sell the property in March fell through. Bidders were required to make bids of at least $31 million to qualify, but no bid reached that level.

    Oh dear. What happens when “required” bids go bid-less? Lots of empty air under FB and lender feet in that scenario.

    1. Speaking of bitcoin, heard this over the weekend regarding it:

      Imagine if keeping your car running 24/7 produced solved Sudoku puzzles that you could then trade for heroin…

  17. I think World War 2 messed us up in so many ways. It created big government in terms of military. This expanded government involvement in everything.

    The tax codes became a weapon of picking the winners and losers.

    Globalism didn’t insure the welfare of the majority in the USA. This resistance against the protection of current citizens of USA is very odd. I live in California, so now the government says we have to pay for ilegals health care. They were already getting health care, food stamps and other forms of welfare..

    Making citizens pay for a welfare state for ilegals will just produce the same corrupted outcomes that it did in the welfare communities of decades.

    It should not be the task of government to dole out money to chosen groups. Government shouldn’t dole out to the fat cats of industry either. The USA has strayed so far from the intent of the Founding Fathers that it’s disgusting.

    1. WW2 did not cause the problems. Ended in 1945, I bought and sold 3 houses in the next 20 years, and lost money on all three homes.

      In 1966, 20 year after the war, I bought this home for 25K, now valued about 30 times the purchase
      Probable cause of inflation was immigration , possibly illegal, forcing price rise in homes. Saw it all as a real estate appraiser until the 80’s when I retired.
      Last, or most relevant , was when a developer was selling lots for 15K, developed, and brokers were buying them and reselling them for 25K, developer stop selling them and raised lots to 25k and home prices the same.
      Went from 10% profit to 25% profit and prices took off.

      then govt started demanding more safety and costs rose as each additional cost raised the sale price for 200% of the additional cost.

      Won’t end well, folks.

      1. I’m so glad you’re still with us.

        So that’s how developers got into the real estate business. They cut out the realtor middleman and just sold their built houses themselves. Heh.

        But still, a $5K safety feature being sold for $10K? I bet those government-hating developers absolutely those new government regs.

      2. “Won’t end well, folks.”

        agreed!, … many cause$, #1 wanker.banker$ acce$$ to government $upplied “free.di$tribution.fund$” … there has to be a road to cross, before the chicken$ gets run.over.

        1. Many causes but World War 2 caused bigger involvement in World affairs with bigger involvement of Government in everything.

          1. The roots of trouble are pre-WW1. Europe and Russia realized the Industrial Revolution, but the Ottoman Empire did not; think middle-east.

          2. the Ottoman Empire did not

            What I’m reading online suggests that their elites didn’t want to change anything and risk losing power. I wonder if we hadn’t had our civil war if it’s possible our elites from the agrarian era might have also been able to prevent the industrial revolution here?

          3. if we hadn’t had our civil war

            The north was already industrialized. Tariffs on manufactured goods from England hammered the southern farmers.

          5. Strike that.

            War of Northern Aggression.

            My apologies to all my patriotic brothers for that error.

          6. “Tariffs on manufactured goods from England hammered the southern farmers.”

            Good call. The industrial revolution led to excess production of goods, so export markets became important requiring larger naval forces to protect those markets since the “sun never set” on Great Britain’s empire. Of course access to petroleum resources was another issue especially after WWII.

  19. I wrote s scare piece over 13 years ago on what would happen if they didn’t handle the housing pop of 2008 in accordance with standing law.

    I basically saw a emergence of Communist takeover of the USA, should the housing fraud not be addressed in accordance with the law. This would of meant no bail outs of the culprits.

    Fast forward to today and witness the reinflation of a housing Ponzi scheme.

    Witness the assertion of socialism by a big political party along with the breakdown of law enforcement of borders.

    Witness the breakdown of civility with the cries for social justice with big government picking the winners and losers.

    The spoof I wrote years ago I didn’t even believe myself. It was a worse case predict ion of what could happen should the housing bust not be handled correctly.

    I’m a optimist by nature, but the trends are getting alarming. Maybe events have to get absurd before they get corrected.

  20. The roller coaster will now sit quietly and uneventfully at the top of the tracks, as so often happens…

  22. “According to statistics compiled by Hawaii Information Service, the median sale price of single-family homes in Kapaa and Lihue is down slightly for the first half of the year, compared to the same period in 2018. But the change is almost negligible, especially considering the more-severe drops elsewhere on the island. According to Halladay, the lower prices are attracting competition.”

    I’m not sure where the competition is originating if prices are flat to falling. Don’t investors generally shun property purchases when prices are plateauing or plummeting?

  23. Outwest, how does Trump do what you suggested without changes in law which Pelosi will block? Trump cannot even stop DACA which was an illegal use of executive power but due to globalist court appointees cannot seem to be undone without Supreme Court review. He cannot just start to fine people. without legal authority. I agree with going what you said and I think Trump would love to have the authority to implement but he has no statute authorizing it. Under Obama states that tried similar things had them struck down and Obama’s justice department argued that they be struck down

  24. Why did they have to mess with real estate! It was the one little asset that was shelter that long term ownership could build equity slowly for retirement.

    It’s really sad to watch what the markets have turned into.

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